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Reuters is airing accusations which, if true, would cast the Facebook IPO process in a very poor light indeed. The news service claims that underwriters Morgan Stanley cut its revenue forecasts for The Social NetworkTM but withheld the information from all but a privileged few.

The allegations are detailed in this Reuters analysis, which says the reduced forecasts were circulated to some investors during the IPO “roadshow” that pump-primed Facebook’s stock ahead of the float.

Reuters says it has not been able to confirm with Morgan Stanley how widely its revised forecast was disseminated pre-IPO. The bank’s only response has been a statement that its revisions were in response to a revised prospectus that Facebook filed with the Securities and Exchange Commission on May 9, and that as far as it’s concerned, its procedures comply with regulations.

That regulatory compliance will, however, be cold comfort to retail suckers investors, who have taken a haircut since the IPO. At the time of writing, Facebook shares were trading at $US31 – having been launched at $US38. ®